18 ELR 20771 -- United States v. Ottati & Goss

United States v. Ottati & Goss

No. C-80-225-L (D.N.H. June 24, 1987)

The court holds that a small business that has been dismissed as a defendant in an action under the Comprehensive Environmental Response, Compensation, and Liability Act is entitled to attorneys fees under the Equal Access to Justice Act (EAJA). The court holds that the United States was not substantially justified in bringing suit against the company. The United States admitted that it had no evidence indicating that the company arranged for the disposal of hazardous substances at the site. The court holds that the company may recover the costs of two trial observers. The court holds that the company is entitled to the costs incurred by its president in meeting with counsel and testifying at trial. Although the president's expenses might not be recoverable under a literal interpretation of 28 U.S.C. § 2412(d)(2)(A) because he is not an attorney, to deny these expenses in this case would be unjust. The court disapproves a portion of the fees requested that were not adequately itemized. The court holds that the company is entitled to recover fees for one attorney at the rate of $ 110 an hour. Inflation and the attorney's proficiency justify a rate in excess of the $ 75 per hour ceiling in the EAJA. The court refuses to approve fees requested for work that was not adequately documented.

Counsel are listed at 18 ELR 20773.

[18 ELR 20771]

Loughlin, J.

Order on Motion for Attorneys Fees

At the outset of the hearing defendant, hereinafter referred to as Geochem, withdrew its claim against the State of New Hampshire.

On January 26, 1983 plaintiff, United States of America, filed an amended and supplemental complaint against Geochem. Allegations were that Geochem arranged for the disposal and storing of hazardous substances containing diatomaceous earth or heavy metals on the Ottati & Goss site.

The case is an adjunct of United States v. Ottati & Goss, et al., the liability phase of this trial being reported in 630 F. Supp. 1361 [16 ELR 20763] (D.N.H. 1985). The damage phase is currently being tried. As of the date of this order, there have been 167 days of trial.

The plaintiff admitted the following:

That the only documentary evidence in its possession was the receiving records of Ottati & Goss;

That they were in possession of no evidence which identified any drum in relation to Geochem, Raytheon, filter cake, filter material or diatomaceous earth;

That the materials delivered by Geochem did not have an adverse effect on public health and safety;

That they were in possession of no evidence indicative of an adverse effect upon surface water; and

That diatomaceous earth was not, per se, a hazardous substance or hazardous waste.

Geochem answered on June 20, 1983 and denied the allegations. Discovery ensued giving the plaintiff full opportunity to present its case. The court was aware of the inherent weakness or lack of a case against Geochem. This resulted in the following excerpt from a final pretrial order of November 18, 1983:

Counsel have been given the following caveat:

If after hearing all the evidence the Court finds parties to have been joined or sued frivolously, attorneys' fees and costs will be assessed against the culpable party and the client's time and reasonable expenses will be reimbursed.

Geochem's motion for summary judgment was heard on December 5, 1983. This motion was denied with reservation.

The case proceeded to trial for approximately five or six months. On June 4, 1984 in response to the court's request the plaintiff submitted an outline of its case against Geochem. On July 25, 1984 the court granted Geochem's motion to dismiss.

On September 25, 1984 the court made an entry of judgment.

This case was subsequently appealed to the First Circuit on November 26, 1984. On February 27, 1987 the plaintiff withdrew its appeal.

At oral argument and in its supplemental memorandum in opposition to this motion of Geochem, plaintiff stated it was substantially justified citing 28 U.S.C. § 2412(d)(1)(B).

A party seeking an award of fees and other expenses shall, within thirty days of final judgment in the action, submit to the court an application for fees and other expenses which shows that the party is a prevailing party and is eligible to receive an award under this subsection, and the amount sought, including an itemized statement from any attorney or expert witness representing or appearing in behalf of the party stating the actual time expended and the rate at which fees and other expenses were computed. The party shall also allege that the position of the United States was not substantially justified. Whether or not the position of the United States was substantially justified shall be determined on the basis of the record (including the record with respect to the action or failure to act by the agency upon which the civil action is based) which is made in the civil action for which fees and other expenses are sought.

The court, in its discretion, may reduce the amount to be awarded pursuant to this subsection, or deny an award, to the extent that the prevailing party during the course of the proceedings engaged in conduct which unduly and unreasonably protracted the final resolution of the matter in controversy.

28 U.S.C. § 2412(d)(1)(B), (C).

28 U.S.C. § 2412(d)(2)(A), (B) provide:

For the purposes of this subsection --

"fees and other expenses" includes the reasonable expenses of expert witness, the reasonable cost of any study, analysis, engineering report, test, or project which is found by the court to be necessary for the preparation of the party's case, and reasonable attorney fees. (The amount of fees awarded under this subsection shall be based upon prevailing market rates for the kind and quality of the services furnished, except that (i) no expert witness shall be compensated at a rate [18 ELR 20772] in excess of the highest rate of compensation for expert witnesses paid by the United States; and (ii) attorney fees shall not be awarded in excess of $ 75 per hour unless the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceedings involved, justifies a higher fee.);

"party" means (i) an individual whose net worth did not exceed $ 1,000,000 at the time the civil action was filed, or (ii) any owner of an unincorporated business, or any partnership, corporation, association, unit of local government, or organization, the net worth of which did not exceed $ 7,000,000 at the time the civil action was filed, and which had not more than 500 employees at the time the civil action was filed; except that an organization described in section 501(c)(3) of the Internal Revenue Code of 1954 (26 U.S.C. § 501(c)(3)) exempt from taxation under section 501(a) of such Code, or a cooperative association as defined in section 15(a) of the Agricultural Marketing Act (12 U.S.C. § 1141j(a)), may be a party regardless of the net worth of such organization or cooperative association.

The court is conversant with the fact that 28 U.S.C. § 2412 is a limited waiver of sovereign immunity and as such its limitations and conditions must be strictly observed, and exceptions thereto are not to be implied. Rhode Island Committee On Energy v. General Services Administration, 561 F.2d 397 [7 ELR 20629] (1st Cir. 1977).

The test of whether the position of the United States is substantially justified for purposes of 28 U.S.C. § 2412 is essentially one of reasonableness in law and in fact. Foley Constr. Co. v. U.S. Army Corps of Engineers, 716 F.2d 1202 (8th Cir. 1983).

Since fees are awarded only to a prevailing party, it follows that the fact that the government lost does not create a presumption that its position was not substantially justified. See, e.g., Washington v. Heckler, 756 F.2d 959, 961 (3d Cir. 1985); Timms v. United States, 742 F.2d 489 (9th Cir. 1984); Ashburn v. United States, 740 F.2d at 850 (11th Cir.); Broad Avenue Laundry and Tailoring v. United States, 693 F.2d at 1391 (Fed. Cir.). The Fifth Circuit has gone one step further. It holds that the United States is not liable merely because it lost, nor exempted "merely because it prevailed at some point in the judicial process -- before a magistrate or in the district court, for example." Martin v. Heckler, 754 F.2d at 1264. This carries the rule to its logical conclusion and we adopt it.

United States v. Yoffe, 755 F.2d 447, 450 (1st Cir. 1985).

The facts and evidence in this case very pristinely prove that the plaintiff had no justification in bringing suit in this case. Thus, it is not a question of substantial justification at all. The court carefully and circumspectfully monitored this suit in conjunction with other suits and the myriad of pleadings, motions and memorandum in the overall Ottati & Goss case. This case was the aftermath of a shotgun approach to litigation. It could have and, more probably, did have untoward effects on a small business such as Geochem. The purpose and intent of 28 U.S.C. § 2412(d)(2) is to eschew situations as presented here.

There was nothing novel in this case on the facts presented. In retrospect, the court should have granted Geochem's motion for summary judgment. Yoffe, 775 F.2d 447, is clearly distinguishable from this case. Even at this late date and the long litany of procedural history the government in its memorandum seeks to justify its actions under CERCLA, when it never had a case to begin with.

The government has the burden of proving substantial justification by a preponderance of the evidence. Sierra Club v. Secretary of the Army, et al. slip op. at 8 (1st Cir. June 3, 1987), citing Yoffe, id. at 450.

Since the hearing on attorneys fees and costs held on May 29, 1987, Geochem filed a motion to amend its motion for attorneys fees and costs. This was done after plaintiff's counsel drew Geochem's attention to disparity in its billing.

Plaintiff disputes two items of costs. One is trial observer costs in the sum of $ 221.85 and $ 2,907.00, totalling $ 3,128.85. The other is President George Haggerty's time and expenses which total $ 5,280.00.

One of the observers, Paula Hurley, for a short period of time had been a temporary clerk for this judge and is a member of the New Hampshire Bar. The other observer, Ellen Friedman, is also a member of the New Hampshire Bar and is now a practicing attorney in Nashua, New Hampshire.

It is paradoxical that plaintiff's counsel should complainabout the trial observer's total bill of $ 3,128.85. Both Hurley and Friedman are attorneys, albeit not as experienced as either Attorney Cook or Attorney Moehrke were in 1984. The irony of the situation is that their charges are much less than what Attorney Cook's precatory request of $ 100.00 an hour or Attorney Moehrke's of $ 125.00 an hour would have been if they were present in court. Attorney Cook at the time was sole practitioner. Attorney Moehrke is practicing in Boston, Massachusetts. Another factor to be considered is the lack of opulence of Geochem.

President Haggerty has submitted an affidavit dating from March 31, 1982 up to and including July 31, 1984. It includes conferences with his local counsel and his counsel from the Commonwealth of Massachusetts. Geochem is a Massachusetts corporation. Trips from Massachusetts to New Hampshire included attendance at court. Mr. Haggerty was also a witness. His company fell within the purview of 28 U.S.C. § 2412(d)(2). See docket entry 749, attachment (affidavit of Paul C. Haggerty that Geochem's net worth was less than $ 5,000,000 (five million dollars) and had less than 500 employees). Perhaps a literal and stringent interpretation of 28 U.S.C. § 2412(d)(2)(A) might sustain plaintiff's argument that there is no recovery because Haggerty is not an attorney. To deny his reasonable costs and expenses under the circumstances of this case would be untoward and not in the interests of justice.

Attorney Ronald Cook seeks to recover attorneys fees in the sum of $ 6,160.00 based on 56 hours at $ 110.00 an hour. (Doc. #1279) (Initially on October 25, 1984 Attorney Cook sought recompense at $ 100.00 an hour.)

The $ 6,160.00 presumably is from November 11, 1986 to June 16, 1987. On October 25, 1984 Attorney Cook sought recompense at $ 100.00 an hour or total fees of $ 19,335.00. Total to date is $ 25,495.00. In its motion to amend, Geochem's counsel blithely ignored plaintiff's counsel's assertion of an error in the October 25, 1984 billing, leaving the entire onus on the court. The problem is further complicated or compounded when Attorneys Moehrke, Wright, Hautanen, Hatch and Walsh submit a potpourri of hours from November 1, 1982 to September, 1984, varying hours and rates for a total of $ 38,750.84. This bill does not have specific dates as does Attorney Cook's.

On perusal of the bills of local and Massachusetts' counsel, prior to November 11, 1986 are items on Attorney Cook's billing pertaining to meetings with Moehrke and himself. On Cook's billing these are quite numerous. The court has no way of ascertaining what portion of Moehrke's charges may or may not be similar in time or duplication.

Reference is made to Home Placement Services, Inc., et al. v. The Providence Journal Company, slip op. (1st Cir. June 1, 1987). This court was justifiably called to task for its cursory opinion as to whether specific hours claimed in the fee application were not allowed because they were deemed excessive, duplicative or unreasonably spent. Counsel's attention is also drawn to New Hampshire Local Rule 39.

In Souza v. Southworth, 564 F.2d 609, 612 (1st Cir. 1977), the court cited King v. Greenblatt, 560 F.2d 1024 (1st Cir. 1977) and stated:

In King, we declared:

As a starting point the attorney or attorneys must submit to the court a detailed record of the time spent on the case and the duties performed. The court must secure from the attorneys a full and specific accounting for their time; bills which simply list a certain number of hours and lack such important specifics as dates and the nature of the work performed during the hour or hours in question should be refused.

The EAJA is designed to "encourage relatively impecunious private parties to challenge abusive or unreasonable governmental behavior by relieving such parties of the fear of incurring large litigation expenses." Sierra Club v. Secretary of the Army, slip op. at 7 (1st Cir. June 3, 1987).

In analyzing costs the court does not approve the sum of [18 ELR 20773] $ 3,128.15. The reason for not approving this sum is the failure to itemize in conformance with the mandate set forth in King.

The remainder of the costs incurred, including President Haggerty's bill, are approved in the sum of $ 21,101.38.

Reference is made to docket #1279, which is Attorney Cook's bill, set forth as exhibit I, totalling $ 6,160.00 or 56 hours X $ 110.00 an hour. This is approved even though the hourly rate exceeds $ 75.00 an hour. The court has reflected on the inflation-adapted hourly rate and the increased proficiency of Attorney Cook in this phase of the case which encompassed almost four and half years of litigation.

The problem is with Attorney Cook's exhibit I (Docket # 1279), a bill of $ 19,335 and the Wright and Moehrke bill of $ 35,518.25. Exhibit II shows a total Cook bill of $ 25,780.00 although totalling his original bill of $ 19,335.00 and his additional bill of $ 6,160.00 totals $ 25,495.00, not $ 25,780.00.

As heretofore stated, the Wright & Moehrke bill has presented problems. While itemized, exact times juxtapositioned to exact dates are lacking. The billing also states that underlining denotes activities not related to Ottati & Goss. The hours of attorneys for a general time period are denoted at greater or lesser rates. For example, Statement (June, 1984): Moehrke 5.5 hours at $ 125/hour $ 587.50; Hautanen 62.3 hours at $ 75/hour $ 4,672.50; Subtotal $ 5,360.00; disbursements $ 91.90; total $ 5,451.90. Also see billing date 6/31/84 showing previous balance $ 15,739.98 and adding attorneys fees of $ 5,360.00 in a general bill to Geochem, Inc. The bill also includes non-Ottati & Goss matters.

The court has spent a lot of time trying to ascertain reasonable attorneys fees in conjunction with a memorandum of law apposite to the facts of this case. On the state of this record, government's counsel's well founded objections plus the fees and part of the costs, the dictates of King, id., the total amount of the fees requested under the EAJA candidly do not meet muster.

The court rules that legal fees and costs are within the purview of the EAJA, but on the record before it cannot be approved.